E-Malt.com News article: Kenya: East Africa Breweries could stop bottling low priced Senator Keg beer because of higher taxes

East Africa Breweries could stop bottling low priced Senator Keg beer following a 75 per cent drop in sales after the government slapped tax on keg beer, AllAfrica reported on August 9.

Managing director Charles Ireland said the company "could take a hard decision on Senator" if the government does not revise its decision on the excise tax adding that already several jobs have been lost as a result.

"Senator consumers are extremely price sensitive consumers... the current position for Senator Keg is not a sustainable one," he said.

Speaking during the release of the company's financial results for the full year period ended June 2014, Ireland said sales growth grew by a modest four per cent, weighed down by Senator Keg performance.

Net sales stood at Sh61.29 billion with profit after tax hitting Sh6.86 billion, a five per cent rise from the previous year. Kenya accounted for 64 per cent of the company's sales, Tanzania 11 per cent, Uganda 18 per cent while South Sudan and Rwanda jointly contributed seven per cent.

In Uganda, profits were up by 50 per cent boosted by high sales of Waragi gin. Its flagship brand Tusker beer retained market leadership, with sales growing by 17 per cent, Guinness sales grew by 20 per cent while Bell beer grew by 14 per cent.

The company said excise tax on Senator Keg, a weak performance in Tanzania and political instability in South Sudan were the main challenges during the year.

Ireland said that, excluding Senator Keg, business performance grew by 16 per cent. The company said it manage to cut its costs by Sh1.6 billion through various measures including reorganisation of the supply chain among others.

The government imposed a 50 per cent excise tax duty on the low-end market beer last year, slightly over eight years since Senator was introduced in the market. Previously it had been exempt to curb consumption of illicit brews in the lower market segment.

Ireland said the tax had caused a price increase of Sh16 for the beer, although EABL had opted to cushion the consumers by absorbing Sh11 and only hiking the retail cost by Sh5.

This pushed the cost of the beer to Sh30. Out of the 12,000 outlets that wholly or vastly sold the Keg, EABL said, 4,000 had closed down since the tax introduction and warned that more will wind up before the end of current financial year.


13 August, 2014